Intellectual property cases often require extensive up-front investigation. California trade secret plaintiffs must identify misappropriated secrets with “reasonable particularity” before commencing discovery, and plaintiffs in patent cases must often identify preliminary infringement contentions at the outset of the case. To help analyze the strength of IP cases, and to obtain evidence of infringement, lawyers frequently retain private investigators. Others do so to avoid the agony of trying to enforce discovery requests.

While the need for early investigation in many IP cases is clear, the ethical limits on the use of private investigators are sometimes ill defined. The controversy surrounding the widely reported Hewlett Packard investigation — and the role played by lawyers in that matter — raised broader questions about the ethical limits on the use of private investigators by attorneys.

The following hypothetical illustrates some of the unsettled issues raised by the use of investigators. Your client, a software company, has heard rumors that a group of former employees have created a new company and are selling a “knock off” of your client’s flagship product. Your client is concerned that its new rival has infringed its copyrights and misappropriated trade secrets. Word on the street also has it that the new company is infringing your client’s trademarks, falsely identifying the new software as the “next version” of your client’s product. Your client has sent a threatening letter, demanding assurances and access to the competing product. The response — from an outside lawyer — tells your client to pound sand. Your client has asked you to investigate potential trade secret misappropriation in the product, and to find out whether the competitor is engaged in trademark infringement.

One frequently used investigative technique in such cases is to have an investigator go “undercover,” typically by posing as a customer. In this hypothetical, an undercover “customer” might be given infringing marketing material, and potentially purchase or obtain an evaluation copy of the product itself. While this technique does not involve the controversial issue of “pretexting” to gain personal information, it potentially implicates ethical prohibitions on the use of deceptive conduct and attorney contact with represented parties.

Can Attorney-Retained Investigators Gain Information Through Deception?

While the California Rules of Professional Conduct are silent on the issue, many other states and the ABA Model Rules of Professional Conduct prohibit lawyers from making material false representations to third parties. ABA Model Rule 4.1 bars attorneys from knowingly making false statements of material fact or law to a third person, and Model Rule 8.4 prohibits engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation. Lawyers are not shielded from the application of these rules by use of an investigator or other third party, since as a general matter, lawyers cannot do through their agents what they would ethically be prohibited from doing themselves.

Despite the ethical prohibition on attorney misrepresentations, several courts have noted that using investigators to pose as customers is an appropriate investigative technique in IP cases and have declined to exclude evidence obtained through such investigations. For example, in Gidatex S.r.L. v. Campaniello Imports, Ltd., 82 F. Supp. 2d 119 (S.D.N.Y 1999), counsel for plaintiff, a furniture manufacturer, had private investigators secretly tape conversations with a terminated distributor’s salespeople in an effort to gain evidence in a trademark infringement suit. The court held that this conduct did not violate New York’s rule against attorney misrepresentations, noting that “hiring investigators to pose as consumers is an accepted investigative technique, not a misrepresentation.” The Court concluded that ethical rules “should not govern situations where a party is legitimately investigating potential unfair business practices by use of an undercover posing as a member of the general public engaging in ordinary business transactions with the target.”

A similar conclusion was reached in Apple Corps Ltd. v. Int’l Collectors Society, 15 F.Supp.2d 456 (D.N.J. 1998), a trademark, copyright, and right of publicity case. There, the court found that use of undercover investigators posing as customers to identify ongoing violations of a consent decree did not violate New Jersey’s prohibition on attorney misrepresentations, observing that “[t] he prevailing understanding in the legal profession is that a public or private lawyer’s use of an undercover investigator… is not ethically proscribed, especially where it would be difficult to discover the violations by other means.”

Despite these authorities, courts have not been uniform in their approved use of investigators who obtain information under false pretenses. In Upjohn Co. v. Aetna Casualty and Surety. Co., 768 F.Supp. 1186 (W.D. Mich. 1990), for example, the court disapproved of interviews conducted by investigators of plaintiff’s former employees without identifying themselves as agents of defense counsel. The Court noted that under Michigan’s rules governing contact with unrepresented persons, if the lawyer knows or should know that an unrepresented person misunderstands the lawyer’s role in the matter, the lawyer shall make “reasonable efforts to correct the misunderstanding.” Under these rules, the court found that it was improper for investigators retained by counsel to misrepresent their identity or purpose in gathering information.

Contact with Represented Parties

The hypothetical above is further complicated by the fact that the new company is now represented by counsel in its dispute with your client. Accordingly, any contact with the new company potentially implicates the prohibition on contact with represented parties.

Various state professional responsibility rules restrict an attorney’s ex parte contacts with employees of a party. This no-contact rule is intended to prevent disruption of the attorney-client relationship and to prevent a represented party from being taken advantage of by opposing counsel. See ABA Formal Opinion 95-396 (1995). As adopted in most states, including California, the no-contact rule prohibits a lawyer, when representing a client, from directly or indirectly communicating about the subject of the representation with a party the lawyer knows to be represented by another lawyer in the matter. While different jurisdictions utilize various tests to determine when an employee of a corporate party is off limits, most, including California, prohibit direct or indirect communications with (i) managerial employees, and (ii) low-level employees if the communication involves the employee’s “act or failure to act in connection with the matter” which may bind the corporation or be imputed to it, or constitutes an admission of the corporation for purposes of establishing liability. Cal. Rule Prof. Conduct 2-100 (B)(2).

The no-contact rule applies not only to direct communications by counsel, but to indirect communications, as well. ABA Formal Opinion 95-396 clarifies that lawyers are responsible for contacts with represented parties by investigators acting under the lawyer’s instructions. While the formal opinion observes that “there is no doubt that the use of investigators in civil and criminal matters is normal and proper” the opinion concludes that when the investigators are directed by lawyers, the lawyers may have ethical responsibility for the investigator’s conduct.

In the hypothetical above, the investigators have been asked to determine the extent to which employees are infringing your client’s trademarks, and to obtain a copy of the product in question. Arguably, such contacts with non-managerial employees are not prohibited by Rule 2-100. If an investigator posing as a customer observes a sales person making misrepresentations about the source of the product, the subject of the communication would not be an “act or omission of the employee in connection with the matter.” Rather, the investigator would merely be observing conduct. In contrast, a communication concerning whether the employee was intentionally misrepresenting the source of the product or had misappropriated your client’s intellectual property to create it would be prohibited.

The court in Gidatex held that the no-contact rule did not prohibit counsel from having investigators engage in discussions with the adverse party’s sales people in an effort to gain evidence in a trademark suit. The court reached a similar conclusion in Fair Automotive Repair, Inc. v. Car-X Service Systems, Inc., 471 N.E.2d 554 (Ill. App. Ct. 1984). There, investigators posing as customers made references to a lower estimate for services from the plaintiffs’ auto repair shops. In response, the defendant’s employees made disparaging remarks about the plaintiff. The court concluded that this did not violate the no-contact rule: “Plaintiffs’ investigators did not seek statements from the employees at the Car-X shops for their information or impeachment value. Rather, when the investigators heard the statement, it was a form of observing conduct.” 


Given the uncertainty regarding the ethical limits on investigative techniques, the ABA and state bar associations should provide more guidance on permissible use of investigators. Until then, lawyers in IP cases must balance their obligation to conduct a reasonable investigation of the facts with current ethical rules. As the widely varying outcomes of cases like Upjohn and Gidatex illustrate, it is important for lawyers to be familiar with the ethical rules of their home state and anywhere an investigation may occur. Moreover, while in theory one can distinguish between permissible and impermissible investigative techniques, as a practical matter there is a risk that an investigator may cross the line from permissible techniques to prohibited communications. Lawyers who choose to retain investigators should clearly communicate expectations and boundaries to avoid surprises down the road.

Finally, even when lawyers are convinced that an investigation will survive legal scrutiny, they must bear in mind how those techniques will play to a jury and the press. Sometimes, even a technically “legal” investigation can cause far greater harm to a client than the underlying IP dispute.