IP enforcement in the U.S. often involves undertaking investigations to gather evidence about a target. While engaging an investigator can offer a valuable opportunity to discreetly gather information, it is critical that the information be gathered in a way that is both useful and legal.

Court cases are where the rubber hits the proverbial road – where courts review what attorneys and investigators have done, and either bless it or sanction it.  In a recent patent dispute in the Delaware federal court, Impossible Foods Inc. v. Motif Foodworks, Inc. (2023), Impossible Foods Inc., a leading producer of plant-based food products, clashed with rival Motif Foodworks, Inc. over alleged patent infringement. The case has unfolded an interesting legal battle revolving around the use of private investigators and the ethical considerations of such use.

Impossible Foods highlights the importance of navigating the delicate balance between competitive intelligence gathering and adherence to ethical standards, and various factors a court will consider in passing, such as the degree of deception, information sought, individuals involved, and the necessity of the investigation.

In this article, we discuss how a business can steer clear of potential complications arising from the manner in which the information is gathered by an investigator and ensure that a court does not preclude use of such gathered information in the litigation that follows.

Background

Impossible Foods, a prominent player in the plant-based food industry, accused Motif Foodworks of infringing its patents for producing meat-substitute products designed to emulate the taste and texture of traditional meat. 

In pursuit of evidence to support its patent infringement claims, Impossible Foods retained the services of private investigation firms that were tasked with obtaining information, including samples of Motif's products, from various sources, including trade shows and business-to-business sales channels.

During trade shows, private investigators posed as potential customers or representatives of a fictitious entity to interact with Motif's employees. These interactions involved inquiries about Motif's products, their availability, and potential collaborations. In most instances, the investigators misrepresented their affiliations and intentions to gain access to information and product samples.

Motif contended that the private investigators, acting as agents of Impossible Food's attorneys, violated ethical rules by making false representations and eliciting information from Motif's employees, both before and after the litigation was commenced. Motif sought a protective order to prevent further undisclosed investigations and to bar Impossible Foods from using any information, inclding product samples, obtained by these investigative means.

The Court's Findings

The court's analysis delved into multiple ethical rules, including Rule 4.1 and Rule 4.2 of the Model Rules of Professional Conduct, made applicable by the court’s local rules, and scrutinized whether the investigators' misrepresentations were violative of the Rules.

Rule 4.1(a) of the Model Rules prohibits a lawyer from, “[i]n the course of representing a client,” making “a false statement of material fact or law to a third person.” In this case, the investigators indisputably made false statements to Motif's employees about their identities and the fictitious business. Rule 4.2 prohibits communications with persons represented by counsel under certain circumstances.

Generally, misrepresentations made solely as to identity or purpose do not rise to a violation of Rule 4.1 when the investigator is posing as a customer in the ordinary course of business. In fact, courts have held that attorneys may use investigators who pose as consumers in various contexts, such as when an investigation is directed at detecting violations of law like infringement of intellectual property rights, and the investigation consists of engaging in commonplace consumer-business interactions.

The court emphasized the purpose of the investigations, specifically the distinction between investigative tactics that uncover unlawful activities and those that target personal information unrelated to the litigation, in determining whether Impossible Foods’ conduct and that of their investigator constituted a violation.

Even if the false statements made by the investigators are not the sort of false statements that are prohibited by Rule 4.1, a separate question existed regarding whether Impossible Foods' attorneys violated Rule 4.2 by arranging for the investigators to seek information from a represented party.

Comment 7 to Rule 4.2 discusses two categories of employees of represented parties who may not be contacted by an opposing attorney if the employer is party to a litigation: (1) members of the litigation control group; and (2) persons who have “authority to obligate the organization with respect to the matter” or “whose act or omission in connection with the matter may be imputed to the organization for purposes of civil or criminal liability.”

Ultimately, the court determined that Impossible Foods’ use of investigators to pose as potential customers and obtain product samples did not constitute a violation of the Rules because Impossible Foods was seeking to investigate unlawful conduct that Motif may have engaged in — specifically, patent infringement. Impossible Foods was not using investigators to obtain highly sensitive information that would not otherwise have been revealed to any outsider, and the evidence the investigators obtained was the type of information and material that ordinarily would be made available to legitimate customers.

The Motif employees involved were performing ministerial acts, such as manning the company's booths at trade shows and responding to inquiries from potential customers. Moreover, it did not appear that any of the interactions between the investigators and Motif personnel resulted in any statements or actions that could be imputed to Motif, as the investigators primarily interacted with low-level personnel.

The court concluded that Impossible Foods’ counsel had not violated the Rules of Professional Conduct through their use of investigators, Motif was not entitled to any sanctions for violations, and there was no justification for a protective order prohibiting any such investigative measures in the future.

Takeaways

Use of private investigation firms to acquire information, while a common practice in litigation, may raise ethical questions about the conduct of the investigators. The implications of this case extend beyond the courtroom, offering critical lessons for businesses, especially those operating in competitive industries.

So what are best practices? First, use a graduated approach.  Start with unobjectionable investigative methods, such as examination of public websites, advertising literature, etc.  There is a great deal of evidence that can be gathered just by reviewing the internet and from open business advertising.  Courts are much more sympathetic when a company has a bona fide basis to believe it is being hurt. Then progress to more aggressive methods as needed.

Once it is determined that a deeper investigation is necessary, at the outset it is important to make clear what the purpose of the investigation is – courts are more impressed with a legitimate purpose (to ascertain whether there is an infringement) than a dubious one (to dig up dirt or embarrass an adversary). 

When an investigation has occurred there are several factors that courts will look at to determine if the actions are acceptable:

1. Degree of Deception – This can be minimal, such as a purchase where the investigator omits to mention that he is buying to see if there is an infringement. This is generally tolerated.  At the other extreme, where someone creates a completely fictitious persona to then pump the target for information, this can be problematic.
    
2. Information Sought – If it is a routine purchase or just taking in a routine sales pitch, courts are tolerant.  Where the information is personal or confidential, much less so.
    
3. Is Trickery Involved? – If the person speaking is simply saying what he would say to any customer, this is tolerated.  Tricking them into making damaging admissions may not be.
    
4. Who One Speaks With – Is the investigator speaking to a low-level employee or an officer or manager that has authority to bind the organization or whose act or omission may be imputed to the organization for purposes of civil or criminal liability?
    
5. Necessity – Is there another way to get this information?  In the case of test buys, for example, courts reason that not allowing them would give license to counterfeiters. If there are other ways to get information, like a deposition, then courts are less tolerant.

Above all else, it is imperative that legal counsel be involved with all aspects of the investigation. There are many grey areas in pursuing an investigation, and sometimes it may be necessary to push the envelope.  That is all right, so long as counsel is making a conscious decision and not one that is ad hoc while events are playing out.

Violations have significant ramifications, potentially impacting the admissibility of evidence and the outcome of costly litigation. Businesses need to work closely with their legal counsel to ensure compliance with relevant ethical guidelines.

Conclusion

The Impossible Foods case offers valuable learning related to the ethical complexities of competitive intelligence gathering. As the business landscape continues to evolve, companies must remain vigilant in navigating the fine line between gaining a competitive edge and respecting ethical considerations, ultimately safeguarding their success in an increasingly competitive marketplace.