FILED: NEW YORK COUNTY CLERK 07/26/ :57 PM INDEX NO /2015 NYSCEF DOC. NO. 32 RECEIVED NYSCEF: 07/26/2017

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1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK x ECONOMIC ALCHEMY LLC, - against - Plaintiff, BYRNE POH LLP, MATTHEW T. BYRNE, PHILIP R. POH, and GARY WALPERT, Defendants x : : : : : : : : : : : : Index No /15 IAS Part 13 (Hon. Manuel Mendez) (Motion Sequence 002) PLAINTIFF S MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTS MOTION TO DISMISS MARC J. BERN & PARTNERS LLP 60 East 42nd Street, Suite 950 New York, New York Tel: (212) Fax: (212) Attorneys for Plaintiff 1 of 29

2 TABLE OF CONTENTS TABLE OF AUTHORITIES... ii PRELIMINARY STATEMENT...1 LEGAL STANDARDS...4 ARGUMENT...7 I. PLAINTIFF S LEGAL MALPRACTICE CLAIM IS LEGALLY SUFFICIENT...7 A. The Complaint Sufficiently Alleges That Defendants Substandard Performance In Prosecuting Plaintiff s Patent Applications Proximately Caused Plaintiff Damages....8 B. Plaintiff Has Properly Alleged Cognizable Damages In The Complaint...16 C. The Court Lacks Subject Matter Jurisdiction To Consider Defendants Assertion Plaintiff s Claims Are Not Patentable Under Alice Corp., Which Are Also Premature And Cannot Be Resolved On The Existing Record...18 II. III. PLAINTIFF S BREACH OF CONTRACT CLAIM IS LEGALLY SUFFICIENT...22 PLAINTIFF REQUESTS LEAVE TO REPLEAD TO ADDRESS ANY DEFICIENCIES IN ITS CLAIMS...23 CONCLUSION i- 2 of 29

3 TABLE OF AUTHORITIES Cases 511 West 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144 (2002)...4 Alice Corp Pty. Ltd. v. CLS Bank Int l, 134 S. Ct (2014)...3, 7, 18, 19, 21, 22 Art & Fashion Group Corp. v Cyclops Prod., Inc., 120 A.D.3d 436 (1st Dep t 2014)...5 ASTech Int l, LLC v. Husick, 676 F. Supp. 2d 389 (E.D. Pa. 2009) , 18 Attias v. Costiera, 120 A.D.3d 1281 (2d Dep t 2014)...5 Bancorp Servs., LLC v. Sun Life Assurance Co. of Canada, 687 F.3d 1266 (Fed. Cir. 2012)...20 Bristol-Myers Squibb Co. v. Merck & Co., 2016 U.S. Dist. LEXIS (D. Del. Mar. 17, 2016)...21 Components Direct, Inc. v. European American Bank and Trust Co., 175 A.D.2d 227 (2d Dep t 1991) , DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014)...21 Dempster v. Liotti, 86 A.D.3d 169 (2d Dep t 2011)...23 Encyclopaedia Britannica, Inc. v. Dickstein Shapiro LLP, 128 F. Supp. 3d 103 (D.D.C. 2015)...22 Even St. Prods. v. Shkat Arrow Hafer & Weber, LLP, 643 F. Supp. 2d 317 (S.D.N.Y. 2008) Fontanetta v. John Doe 1, 73 A.D.3d 78 (2d Dep t 2010)...5 Gamiel v. Curtis & Riess-Curtis, P.C., 16 A.D.3d 140 (1st Dep t 2005) ii- 3 of 29

4 Garnett v. Fox, Horan & Camerini, LLP, 82 A.D.3d 435 (1st Dep t 2011)...8, 17 Gelfand v. Oliver, 29 A.D.3d 736 (2d Dep t 2006)...14, 15 Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314 (2002)...5 IMS Engineers-Architects, P.C. v. State of New York, 51 A.D.3d 1355 (3d Dep t 2008)...6 InKine Pharm. Co. v. Coleman, 305 A.D.2d 151 (1st Dep t 2003)...14 International Harvester Co. v. Long Mfg. Co., 235 F. Supp. 223 (E.D.N.C. 1964)...19 Johnson & Johnson, Inc. v. Wallace A. Erickson & Co., 627 F.2d 57 (7th Cir. 1980)...19 Lappin v. Greenberg, 34 A.D.3d 277 (1st Dep t 2006)...17 Lee v Dow Jones & Co., Inc., 121 A.D.3d 548 (1st Dep t 2014)...6 Leon v. Martinez, 84 N.Y.2d 83 (1994)...5, 7 Mercantile Capital Partners Fund, LP v. Morrison Cohen LLP, 2008 N.Y. Misc. LEXIS 2197 (Sup. Ct. N.Y. Co. Mar. 4, 2008)...8 Miglino v. Bally Total Fitness of Greater N.Y., Inc., 20 N.Y.3d 342 (2013)...6 Nissenbaum v. Ferazzoli, 171 A.D.2d 654 (2d Dep t 1991)...24 Nomadix, Inc. v. Hospitality Core Servs. LLC, 2015 U.S. Dist. LEXIS (C.D. Cal. Apr. 3, 2015)...21 P.T. Bank Cent. Asia v. ABN AMRO Bank N.V., 301 A.D.2d 373 (1st Dep t 2003)...4 Rovello v. Orofino Realty Co., 40 N.Y.2d 633 (1976)...6 -iii- 4 of 29

5 Rudolf v. Shayne, Dachs, Stanisci, Corker & Sauer, 8 N.Y.3d 438 (2007)...9, 14 Skillgames, L.L.C. v. Brody, 1 A.D.3d 247 (1st Dep t 2003)...4 Synchronoss Techs., Inc. v. Hyperlync Techs., Inc., 2016 U.S. Dist. LEXIS (D.N.J. Mar. 7, 2016)...21 Tenzer, Greenblatt, Fallon & Kaplan v. Ellenberg, 199 A.D.2d 45 (1st Dep t 1993)...17 Ultramercial, Inc. v. Hulu, LLC, 722 F.3d 1335 (Fed. Cir. 2013) WAG Acquisition, LLC v. Multi-Media, LLC, 2015 U.S. Dist. LEXIS (D.N.J. Sept. 10, 2015)...20 Xia-Ping Wang v. Diamond Hill Realty, LLC, 116 A.D.3d 767 (2d Dep t 2014)...6 Zarin v. Reid & Priest, 184 A.D.2d 385 (1st Dep t 1992)...9, 16, 17 Statutes and Rules 28 U.S.C , U.S.C. 1338(a)...19 CPLR CPLR CPLR R. 3211(a)(1)...5 CPLR R. 3211(a)(7)... passim -iv- 5 of 29

6 Plaintiff Economic Alchemy LLC ( Economic Alchemy ), by its attorneys Marc J. Bern & Partners LLP, respectfully submits this memorandum of law in opposition to Defendants motion for an order, pursuant to CPLR Rule 3211(a)(7), dismissing the complaint. PRELIMINARY STATEMENT The Complaint contains detailed factual allegations describing how Defendants who represented Plaintiff in the prosecution of certain patent applications before the United States Patent and Trademark Office ( USPTO ) committed a number of errors in their representation of Plaintiff. The Complaint further describes the types of harm that Defendants sub-par performance caused, including loss of patent term, the expenses of fixing Defendants errors (attorneys fees and other costs), and the impairment of the value of Plaintiff s patent portfolio. All of these allegations make it quite clear that Plaintiff has a cause of action against Defendants for legal malpractice. More specifically, Defendants filed non-provisional patent applications on Plaintiff s behalf that contained placeholder claims, which Defendants acknowledged needed to be amended and supplemented. However, despite promising Plaintiff that such amendments would follow soon after the non-provisional filings, Defendants never prepared any amendments. When Plaintiff expressed concern to Defendants that the USPTO would begin to consider the patent applications with the placeholder claims (which would be problematic for a number of reasons and would make it much harder to fix any deficiencies in the patent applications thereafter), Defendants brushed off those concerns and insisted that that would never happen. Of course, that is precisely what did happen the USPTO reviewed and started evaluating Plaintiff s patent applications with the placeholder claims, and issued office actions on those placeholder claims. Compounding their substandard representation, Defendants failed to inform 6 of 29

7 Plaintiff about the USPTO office actions and further failed to inform Plaintiff that Defendants had let one of Plaintiff s patent applications go abandoned. To add to Defendants negligent conduct, Defendants allowed Defendant Gary Walpert to represent Plaintiff at a time when Mr. Walpert was suspended from practicing before the USPTO. This separately supports Plaintiff s claim for breach of contract (the Retainer Agreement) because Defendants provided a suspended attorney to represent Plaintiffs knowing that Walpert had been suspended. Curiously, other than one small paragraph in Defendants statement of facts in their moving memorandum describing what the third cause of action alleges (Walpert s suspension), Defendants completely ignore Walpert s suspension and the clear breach of contract that resulted from knowingly allowing a suspended attorney to represent Plaintiff in prosecuting its patent applications. In attacking the Complaint through this motion to dismiss, Defendants attempt to undermine the allegations primarily with a competing version of facts in the Walpert Affidavit. (See NYSCEF Doc. No. 19.) In fact, much of Defendants arguments in support of their motion amount to nothing more than No we didn t which is not a sufficient basis to challenge the sufficiency of a pleading on a motion under CPLR Rule 3211(a)(7). Defendants cannot merely deny or alter the facts alleged in the Complaint as the basis to allege Plaintiff failed to state a cause of action. In fact, as the authorities Plaintiff cites in the Legal Standards section below demonstrate, the Court should completely disregard the Walpert Affidavit because the only affidavits that can be considered on a motion to dismiss are those provided by Plaintiff to supplement or to fill in gaps in the Complaint. A defendant cannot provide a factual affidavit to challenge the allegations of a complaint at this stage of the lawsuit. Beyond attacking Plaintiff s allegations of proximate cause and damages, Defendants -2-7 of 29

8 essentially argue that even if they did commit malpractice, Plaintiff has no claim against them because either Plaintiff or its subsequent attorneys could have fixed Defendants mistakes. This argument is as absurd as it is wrong as a matter of law. Defendants are responsible for their own conduct, and even if Plaintiff is ultimately able to fix what Defendants marred, those fixes will come at a high price in the form of lost time under the patents that ultimately issue and the costs of subsequent attorneys and others to fix Defendants mistakes. Beyond attacking the elements of Plaintiff s legal malpractice claim, Defendants try to avoid liability by referring to the United States Supreme Court decision in Alice Corp. Pty. Ltd. v. CLS Bank Int l, 134 S. Ct (2014), which clarified certain issues relating to patent eligibility. Hoping to duck Plaintiff s claims, Defendants argue that because Plaintiff s patent claims are invalid under Alice Corp., any malpractice they did commit caused no harm because the patents would not have been valid anyway. As detailed below, there are several flaws in this argument, including that it is premature at this stage of the action to evaluate Plaintiff s claims under Alice Corp. Defendants have not provided the Court with any information or documents that the Court could use to determine the issues Defendants raise under Alice Corp. But, even more importantly, Defendants fail to realize that this Court lacks the subject matter jurisdiction to evaluate Plaintiff s patent claims and to make any determination about patentability. Federal courts have exclusive jurisdiction over the validity of patents under 28 U.S.C. 1338, which expressly excludes state courts from determining such issues. This Court is therefore unable to hear and to determine Defendants arguments that Plaintiff s patent claims are not patentable under Alice Corp. The Complaint more than sufficiently alleges that Defendants improperly advised Plaintiff on the patent applications, failed to act diligently in prosecuting the patent applications -3-8 of 29

9 (specifically, by delaying any amendments or supplements to the placeholder claims, resulting in office actions on the placeholder claims), and in preparing substandard work product as the content of the patent applications. This rather easily states a claim for legal malpractice because assuming those facts to be true, Defendants would be liable for legal malpractice. At this stage of the action, this the only standard that Plaintiff needs to satisfy, and the Complaint more than surpasses it. Defendants cannot obtain a dismissal of the Complaint simply by denying the facts in the Complaint, by offering alternative facts through the Walpert Affidavit, and by casting the responsibility on Plaintiffs or subsequent counsel to fix Defendants mistakes. For all of these reasons, and for the reasons detailed below, Defendants motion should be denied. LEGAL STANDARDS The scope of the Court s inquiry on a motion to dismiss under CPLR Rule 3211(a)(7) is narrowly circumscribed. See P.T. Bank Cent. Asia v. ABN AMRO Bank N.V., 301 A.D.2d 373, 375 (1st Dep t 2003). The Court does not assess the merits of the Complaint or any of its factual allegations, and the motion should be denied if, within the four corners of the Complaint, factual allegations are discerned which, taken together, manifest a claim cognizable at law. 511 West 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, (2002); Skillgames, L.L.C. v. Brody, 1 A.D.3d 247, 250 (1st Dep t 2003) (citation omitted). The Complaint should be liberally construed, and the Court should accept as true all facts in the Complaint and in Plaintiffs submissions in opposition to the motion. 511 West 232nd Owners Corp., 98 N.Y.2d at 152. Plaintiffs are to be accorded the benefit of all possible favorable inferences, and the Complaint is deemed to allege whatever can be implied from its statements by fair and reasonable intendment. Components Direct, Inc. v. European American Bank and Trust Co., -4-9 of 29

10 175 A.D.2d 227, 232 (2d Dep t 1991). On a motion to dismiss under CPLR Rule 3211(a)(1) based upon documentary evidence, the motion should be denied where the documentary evidence does not utterly refute Plaintiffs factual allegations conclusively establishing a defense as a matter of law. Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326 (2002); Leon v. Martinez, 84 N.Y.2d 83, 88 (1994). In order for evidence submitted in support of a CPLR Rule 3211(a)(1) motion to qualify as documentary evidence, it must be unambiguous, authentic, and undeniable, and must definitively dispose of Plaintiffs claims. Attias v. Costiera, 120 A.D.3d 1281, 1282 (2d Dep t 2014) (citations omitted). 1 The documentary evidence Defendants have provided consists of the Walpert Affidavit, the parties engagement agreement, several filing receipts from the USPTO, and a printout from the USPTO website. None of these documents provides any defense to Plaintiff s claims as a matter of law. First, the Walpert Affidavit does not constitute documentary evidence and cannot provide a basis for dismissing the complaint. See Fontanetta v. John Doe 1, 73 A.D.3d 78, 86 (2d Dep t 2010) (explaining affidavits and deposition testimony are not documentary evidence within the intendment of a CPLR 3211(a)(1) motion to dismiss ); see also Art & Fashion Group Corp. v Cyclops Prod., Inc., 120 A.D.3d 436, 438 (1st Dep t 2014) (same). In addition, the Court should not consider the Walpert Affidavit in assessing Defendants motion to dismiss because affidavits are not properly considered on a motion pursuant to CPLR 1 Although Defendants notice of motion does not invoke CPLR Rule 3211(a)(1), Defendants memorandum of law describes documentary evidence as a basis for dismissal of the complaint, which is addressed by CPLR Rule 3211(a)(1). Substantively, Defendants efforts to use documentary evidence fails because the Walpert Affidavit does not constitute documentary evidence within the rule, and the materials Defendants point to in support of their motion in no way utterly refute Plaintiff s claims of 29

11 Rule 3211(a)(7). As the First Department explained in Lee v Dow Jones & Co., Inc., 121 A.D.3d 548 (1st Dep t 2014), the lower court improperly considered affidavits and deposition testimony submitted by defendant in deciding its CPLR 3211 (a) (7) motion to dismiss the complaint because CPLR 3211(a)(7) limits [the court] to an examination of the pleadings to determine whether they state a cause of action. Id. at 549 (citing Miglino v. Bally Total Fitness of Greater N.Y., Inc., 20 N.Y.3d 342, 351 (2013); Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 636 (1976)); see also Xia-Ping Wang v. Diamond Hill Realty, LLC, 116 A.D.3d 767, (2d Dep t 2014) (stating that [a]ffidavits submitted by a defendant will almost never warrant dismissal under CPLR 3211 (a)(7) unless they establish conclusively that plaintiff has no cause of action ). The New York Court of Appeals re-affirmed the impropriety of considering affidavits submitted by a defendant to support a motion to dismiss in Miglino v. Bally Total Fitness of Greater N.Y., Inc., explaining: Bally s motion is supported by affidavits that contradict [plaintiff s] claim, by purporting to show that the minimal steps adequate to fulfill a health club s limited duty to a patron apparently suffering a coronary incident--i.e., calling 911, administering CPR and/or relying on medical professionals who are voluntarily furnishing emergency care--were, in fact, undertaken. But, as noted before, this matter comes to us on a motion to dismiss, not a motion for summary judgment. As a result, the case is not currently in a posture to be resolved as a matter of law on the basis of the parties affidavits, and Miglino has at least pleaded a viable cause of action at common law. Id., 20 N.Y.3d at 351 (emphasis added). The Third Department agreed in IMS Engineers- Architects, P.C. v. State of New York, 51 A.D.3d 1355 (3d Dep t 2008), holding that the lower court should not have made reference to an affidavit submitted by defendant in support of its motion, given that affidavits should be considered on such motions to dismiss for failure to state a cause of action only to remedy defects in the pleadings. Id. at 1356 (citations omitted); see of 29

12 also Leon v. Martinez, 84 N.Y.2d 83, 88 (1994) ( [i]n assessing a motion under CPLR 3211(a)(7), however, a court may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint ) (emphasis added). Defendants citation to Siegel s New York Practice as support for the use of affidavits to go behind the pleading to prove its lack of merit on a motion pursuant to CPLR Rule 3211(a)(7) misstates the law and is inconsistent with the overwhelming number of decisions holding to the contrary. Notably, Defendants cite only to Siegel s New York Practice and fail to cite a single case to support the use of an affidavit on a motion pursuant to CPLR Rule 3211(a)(7). Accordingly, the Court should disregard the Walpert Affidavit in determining whether the Complaint is legally sufficient and states viable causes of action for legal malpractice and breach of contract. At best, Walpert simply contests the facts alleged in the Complaint in some cases directly contradicting such facts which is completely improper on a pre-answer motion to dismiss. ARGUMENT I. PLAINTIFF S LEGAL MALPRACTICE CLAIM IS LEGALLY SUFFICIENT Defendants mount an attack on the Complaint s legal malpractice claim by arguing that (i) Plaintiff has failed to plead (and cannot prove) causation, (ii) Plaintiff has suffered no damages from the alleged malpractice, and (iii) the United States Supreme Court s decision in Alice Corp Pty. Ltd. v. CLS Bank Int l, 134 S. Ct (2014), makes Plaintiff s claims nonpatentable. None of these arguments is correct, and they provide no basis to dismiss the Complaint of 29

13 A. The Complaint Sufficiently Alleges That Defendants Substandard Performance In Prosecuting Plaintiff s Patent Applications Proximately Caused Plaintiff Damages Defendants assertion that Plaintiff did not allege a causal link between their conduct and Plaintiff s damages amounts to nothing more than a denial of the facts alleged in the Complaint. While Defendants should be well aware that presenting an alternate narrative cannot justify a dismissal on a pre-answer motion, that is precisely the argument they advance and the approach that they have taken here. But, looking only to the Complaint (as the Court must do), the allegations in the Complaint more than sufficiently allege the causal connection required at the pleading stage. Defendants also insinuate that Plaintiff will ultimately be unable to prove its malpractice claim, but this argument likewise is irrelevant on a pre-answer motion to dismiss. (And, this argument is substantively incorrect because there is a clear record of Defendants repeated failures in how they handled Plaintiff s patent applications.) As courts have repeatedly cautioned, whether a plaintiff will be able to prove its claims has no bearing on the analysis precipitated by a motion to dismiss whether the Complaint alleges facts that make out a cause of action. See Garnett v. Fox, Horan & Camerini, LLP, 82 A.D.3d 435, 436 (1st Dep t 2011) (noting [a]t this stage, plaintiff does not have to show a likelihood of success, as the motion court found, but is required only to plead facts from which it could reasonably be inferred that defendant s negligence caused Boylan s loss ) (citation omitted); see also Mercantile Capital Partners Fund, LP v. Morrison Cohen LLP, 2008 N.Y. Misc. LEXIS 2197, at *11 (Sup. Ct. N.Y. Co. Mar. 4, 2008) ( as noted above, at this preliminary stage in the litigation, MCPF need only allege, not prove the proximate cause element of its claim ) (citation omitted); Even St. Prods. v. Shkat Arrow Hafer & Weber, LLP, 643 F. Supp. 2d 317, 322 (S.D.N.Y. 2008) ( [a]t this early of 29

14 stage of the litigation, however, Plaintiff need only allege, not prove, the proximate cause element of the legal malpractice claim ) (citations omitted). The Complaint more than adequately alleges each element of Plaintiff s legal malpractice claim including proximate cause. Plaintiff has properly pleaded causation because it has alleged that Defendants malpractice was a proximate cause of its damages. See Rudolf v. Shayne, Dachs, Stanisci, Corker & Sauer, 8 N.Y.3d 438, 442 (2007). Specifically, and as the Complaint alleges, Plaintiff has alleged that Defendants failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that their breach of this duty proximately caused Plaintiff to sustain actual and ascertainable damages. Id. (citation omitted); see also Zarin v. Reid & Priest, 184 A.D.2d 385, 386 (1st Dep t 1992) ( In order to establish the elements of proximate cause and actual damages in a malpractice case, the plaintiff must show that but for the attorney's negligence, what would have been a favorable outcome was an unfavorable outcome ). The Complaint contains a number of specific factual allegations that describe why Defendants were negligent and why that negligence caused Plaintiff to suffer harm. As the Complaint alleges: This is a legal malpractice case arising out of negligent conduct by the Defendants, which has resulted in the severe impairment of the Plaintiff s intellectual property portfolio and has also resulted to date in stopping the Plaintiffs from obtaining patents for patentable inventions. (Compl. 10) The Defendants utterly failed to provide competent representation to EA, repeatedly missing USPTO deadlines, lying about the status of patent applications and providing erroneous information. Defendants were hired to timely file a patent application with appropriate claims. But instead Defendants filed placeholder claims which were supposed to be used temporality in order to meet the deadline, but were essentially meaningless. Defendants claimed they would promptly file the real claims and that EA would not be harmed by the filing of placeholder claims. But they did never did file the legitimate claims. Even worse, Defendants failed to advise EA of certain Office Actions which the United States Patent and Trademark Office ( USPTO ) commenced of 29

15 and sent to the Defendants challenging the placeholder claims. These Office Actions were difficult to defend because of the bogus nature of the placeholder claims. And the Office Actions required timely responses by Defendants in order to protect the subject intellectual property from diminution of value. In short, by committing malpractice and then compounding the malpractice by failing to advise EA of the Office Actions, despite repeated inquiry by EA as to the status of the patent applications, Defendants severely impaired the value of EA s patent portfolio, undermining EA s attractiveness to potential investors, impairing or destroying EA s ability to obtain patents for otherwise patentable inventions while allowing EA s competitors to benefit from Defendants mistakes. (Id. 15) By Agreement dated October 11, 2012, EA, Byrne Poh and Walpert memorialized their late-august agreement, and Byrne Poh agreed to represent EA and Economic Alchemy Inc. in the preparation and prosecution of the patent applications. (Id. 32) Guzman and Walpert met in person at Byrne Poh s office on October 16, 2012 to discuss the filing. Poh was supposed to be at the meeting, but Walpert advised Guzman that Poh could not attend because Poh s wife was having a baby. (Id. 33) At this October 16 meeting, Walpert asked Guzman to prepare a redline version of the provisional filing which had been prepared by Kramer Levin. Walpert told Guzman to focus only on the Descriptions and don t worry about the Claims. The implication at the time was that drafting the Claims was lawyer s work, and that Byrne Poh would draft the Claims. (Id. 34) On or around October 31, 2012, Walpert asked Guzman to split the patent into five separate patent applications and Guzman complied. (Id. 35) On November 9, 2012, Guzman asked Walpert who would be doing work on the Claims. Walpert advised Guzman that Poh would be working on the Claims, and that he (Walpert) would help as needed. (Id. 36) Guzman worked extensively on the Descriptions, as Walpert had instructed. Guzman also drafted detailed steps for the Claims, and asked Byrne Poh to incorporate these details into the Claims, in proper Claims language. And while Poh and Walpert were supposed to be doing work on the Claims, they did not make any of their work product available in advance of the November 14, 2012 deadline. (Id. 37) On November 14, 2012, exactly one year after the provisional application, Byrne Poh on behalf of EA submitted to the USPTO five applications for patents. (Id. 38) Just before this filing, Walpert advised Guzman that the five patent applications would be filed with placeholder claims. Walpert advised Guzman that he (Walpert) did not have time to draft the Claims by November 14, and that placeholder claims were an acceptable alternative so long as the claims were properly drafted and promptly amended. At this point Walpert advised Guzman that Byrne Poh would amend the Claims with properly drafted Claims in a few weeks. (Id. 39) of 29

16 On December 4, 2012, Guzman and Walpert met to discuss amending the Claims. At this meeting Walpert advises Guzman that amended Claims would be filed in a week or two. (Id. 40) Despite this, Walpert did not respond to Guzman s December 11 and December 13, 2012 requests for a status update. (Id. 41) On December 21, 2012 Walpert advised Guzman that he is beginning to work on (the Claims) and hope to get them filed this year. The implication being that the amended Claims would be filed within the next ten days. (Id. 42) Over the course of the next six months, Walpert had a legion of excuses for not amending the Claims, or otherwise doing the work Byrne Poh was hired to complete. He claimed, for example, that he was busy on other things, that he was moving, and that the Claims were taking too long to draft. And over time, he became increasingly difficult for Guzman to reach. Guzman repeatedly tried to reach Walpert by phone but could almost never do so. Guzman s repeated requests for updates regarding the status of amending the Claims were either deflected or ignored. (Id. 43) On January 9, 2013, Byrne Poh forwarded to Guzman a notice from the USPTO. Byrne Poh did not explain the notice and when Guzman inquired about the notice, Byrne Poh did not respond. (Id. 44) Unbeknownst to Guzman at the time, the USPTO had issued an Office Action to EA and served Byrne Poh with the Office Action on December 17, (Id. 45) On January 29, 2013, Walpert responded to Guzman s inquiry from a day earlier by stating I have only started working on the claims and expect to get a draft to you in a few days. There is no deadline rush here. (emphasis added). Walpert failed to mention that the USPTO had already issued an Office Action. (Id. 46) On February 18, 2013, Walpert wrote another , this one responding to Guzman s February 11, asking for a status update on the drafting of the Claims. This time Walpert suggested the work would be completed by March 1, 2013, and assured Guzman your rights will be unaffected by the delay. March 1 came and went without Byrne Poh showing Guzman any work, much less filing any amended Claims. (Id. 47) In March and April of 2013 Byrne Poh ignored repeated inquiries by Guzman related to the status of the work on the amended Claims. (Id. 48) On May 3, 2013, Guzman and Walpert spoke on the phone. In that phone conversation Walpert promised to deliver the amended Claims within a week. Walpert also asked Guzman/EA for more money, to which Guzman replied that no additional money would be paid until Byrne Poh filed the amended Claims as promised. (Id. 49) May, June and early July of 2013 saw a continuation of the pattern whereby Guzman would repeatedly inquire as to the status of the amended Claims, and receive no response of 29

17 By July of 2013 Guzman believed that Walpert was screening in order to avoid her calls, so after many futile efforts to reach Walpert by telephone, on July 11, 2013 Guzman decided to call through the main office number instead of calling Walpert directly. This tactic worked, and Guzman actually reached Walpert. (Id. 50) The July 11, 2013 phone call lasted for nine minutes. In the July 11, 2013 phone call, Walpert assured Guzman that the Claims would be done within a few days. Again, this did not happen. (Id. 51) On July 17, 2013, Guzman wrote to Walpert and Poh stating When we spoke last week you promised the revised claims would be done by Monday I am very disappointed by your firm s handling of this. Walpert responded that crafting Claims to match the Descriptions was a tedious and time-consuming effort. (Id. 52) The next day, Walpert called Guzman and agreed to meet Guzman on August 1, Walpert instructed Guzman to go through the Descriptions and make a list of what is not included in the Claims. Guzman reluctantly agreed to do this work, even though this is attorney work that is covered by the parties Retainer Agreement. Also at this meeting, Guzman asked for and received the November 14, 2012 filings which had previously never been sent to Guzman. (Id. 53) Guzman and Walpert met on August 1, 2013 and again on August 8, Guzman expressed her concern that the patent applications might be reviewed with the placeholder claims. Walpert was dismissive of these concerns, telling Guzman that this would never happen and that Guzman had anxiety because she was not familiar with the patent process. Guzman nevertheless asked Walpert what would happen if EA got an Office Action before the amended Claims were filed. Walpert responded well, first they would have to pick me up off the floor and assured Guzman that would never happen. (Id. 54) Unbeknownst to Guzman or EA at the time, Byrne Poh had already received several office actions, meaning that the USPTO was in fact considering some of the placeholder claims that Byrne Poh had drafted with a promise of a prompt amendment in November of Even more stunning, Byrne Poh had already let one patent go abandoned. (Id. 55) In fact, Byrne Poh never properly drafted any Claims. Even after Guzman provided Walpert with detailed Claims notes which listed all items in the Descriptions that were missing from the Claims, Byrne Poh simply copied and pasted from old work product. And Byrne Poh did not even do this until October 23, (Id. 56) On November 14, 2013, Guzman acting for EA fired Byrne Poh and asked for the files to be sent to Fincham Downs and Mike Downs, Esq., who was hired to replace Byrne Poh. In the termination letter, Guzman expressed the fear that EA could get an office action and that the patents could get examined with placeholder claims. (Id. 57) Six days later, Walpert advised Guzman of the existence of an Office Action but he did of 29

18 not advise Guzman that Byrne Poh had let one of the patents go abandoned. Walpert also failed to deliver the EA files to Fincham Downs. Walpert instead insisted on a conference call. (Id. 58) To date, no patents have been issued yet. There are Office Actions on all five patent applications pending. These applications are all being held by the USPTO under a nonpublication order. Generally speaking, EA is hamstrung in responding to these Office Actions because the placeholder claims are essentially meaningless and cannot be defended sufficiently such that the USPTO will award a patent that has commercial value. (Id. 60) Despite substantial remediation efforts, Byrne Poh s bogus placeholder claims were so poorly drafted that it is highly unlikely that any of these claims will be resurrected as commercially viable patents. Moreover, even if the claims could be resurrected EA has lost at least two years in the process. (Id. 66) As these highly-detailed allegations demonstrate, Defendants inflicted substantial delays on Plaintiff in misleading her for about ten months that Defendants were preparing the amendments and supplements to Plaintiff s patent applications when in fact Defendants had done nothing. Defendants disingenuously spin these allegations by arguing that Defendants fail[ed] to amend the claims in the five nonprovisional applications as expeditiously as EA wished. (Defs. Mem. at 12.) But, Defendants spin is just that and is belied by the detailed narrative included in the Complaint. Importantly, the Complaint also alleges that Defendants use of placeholder claims and their subsequent long-running failure to amend those placeholder claims directly led to the USPTO processing and evaluating Plaintiff s applications on the basis of those placeholder claims. Even though Plaintiff alleged that its CEO (Giselle Guzman) repeatedly expressed her concerns to Defendants that the USPTO would consider the placeholder claims if the applications were not promptly amended, and even though Walpert insisted that would never happen, that is precisely what happened. As the Complaint alleges, the USPTO evaluated and took action on Plaintiff s applications with the placeholder claims, which has directly harmed Plaintiff and has required substantial and expensive remediation efforts with new counsel of 29

19 Plaintiff has alleged that [d]espite substantial remediation efforts, Byrne Poh s bogus placeholder claims were so poorly drafted that it is highly unlikely that any of these claims will be resurrected as commercially viable patents. Moreover, even if the claims could be resurrected EA has lost at least two years in the process. (Compl. 66.) All of Plaintiff s allegations provide more than enough factual detail to demonstrate that Plaintiff has a cause of action for legal malpractice and that Defendants motion should be denied. In addition, the Complaint explains enough detail about the nature of Plaintiff s damages flowing directly from Defendants substandard performance in prosecuting Plaintiff s patent applications. Specifically, Plaintiff has alleged that its damages are calculated based in large measure on the difference between the expected revenue which would have been received had Byrne Poh not committed malpractice and the expected revenue now, given Byrne Poh s malpractice and the concomitant impairment of the patent portfolio and loss of competitive advantage. Also included in damages are EA s costs associated with attempting to mitigate damages, including without limitation the retention of successor patent counsels. (Compl. 65.) This sufficiently alleges the causal connection between Defendants negligent conduct and Plaintiff s damages. See Rudolf, 8 N.Y.3d at 443 (noting damages may include expenses incurred in an attempt to avoid, minimize, or reduce the damage caused by the attorney s wrongful conduct); InKine Pharm. Co. v. Coleman, 305 A.D.2d 151, 152 (1st Dep t 2003) (noting plaintiff alleged defendants negligence in handling plaintiff s patent applications caused substantial diminution of the value of its worldwide license to manufacture, sell and sublicense the product); Gelfand v. Oliver, 29 A.D.3d 736, 737 (2d Dep t 2006) (delays caused by attorney s mishandling and mistakes were sufficient to state claim for legal malpractice); and see ASTech Int l, LLC v. Husick, 676 F. Supp. 2d 389 (E.D. Pa. 2009) (holding as sufficient of 29

20 plaintiffs allegations they suffered damages by paying legal fees in exchange for work of no value, paying legal fees to another attorney to fix the defendants errors, and by losing valuable patent life as a result of defendants legal malpractice). Delays caused by an attorneys conduct (or inaction) and the legal expenses required to fix such conduct or inaction are sufficient forms of damages to support a claim for legal malpractice. See, e.g., Gamiel v. Curtis & Riess-Curtis, P.C., 16 A.D.3d 140, 141 (1st Dep t 2005) (affirming denial of motion to dismiss). Although the facts of Gamiel are in a different context, the underlying holding applies equally to the circumstances here as described in the Complaint. Plaintiff has alleged that, but for Defendants negligence in prosecuting Plaintiff s patent applications (including the use of placeholder claims), the resulting delay and legal expenses required to fix Defendants negligence would not have occurred. In the context of Defendants motion, these facts must be taken as true, and Defendants attempt to tell a different story through the Walpert Affidavit cannot undermine any of the allegations in the Complaint. As one example, although the Complaint describes that On or around October 31, 2012, Walpert asked Guzman to split the patent into five separate patent applications and Guzman complied (Compl. 35), the Walpert Affidavit directly contradicts this allegation by insisting that Ms. Guzman also told me that rather than filing one nonprovisional patent application, she wished to split up the subject matter of the provision application into five separate nonprovisional applications. (Walpert Aff. 7.) And, Defendants attempt to point the finger at the USPTO and to argue that any delays were beyond their control and did not impact Plaintiff s applications cannot be resolved on this motion to dismiss. See Gelfand, 29 A.D.3d at 737 (noting that defendant s contention that any delay caused by his actions was de minimis cannot be resolved on a motion pursuant to CPLR of 29

21 3211(a)(7), and must await further development of the record ). Defendants rely heavily on Zarin v. Reid & Priest, 184 A.D.2d 385, but the facts of Zarin and the conclusions on which those facts rest are completely inapposite here. In Zarin, the First Department explained that the plaintiff ultimately prevailed because of the defendant s legal work. Specifically, in handling the plaintiff s case before the Tax Court, the Tax Court s initial rejection of the defenses raised by the defendant was reversed by the appellate court. In addition, the legal defense that plaintiffs argued the defendants should have raised was not the basis of the appellate court s reversal, and the Tax Court (on a motion for reconsideration) described that defense as highly questionable and far less than certain to succeed. Id. at 387. As the First Department held, not only do plaintiffs conclusory allegations amount only to secondguessing of defendants strategy, they ignore the fact that the legal defense actually interposed by defendant law firm actually prevailed. Id. Here, by contrast, the strategy Defendants advised Plaintiff to follow and the work product Defendants submitted to the USPTO (splitting the provisional patent application into five non-provisional patent applications and using placeholder claims that went un-amended) is what caused Plaintiffs harm in the form of delay, additional attorneys fees to fix Defendants errors, lost patent term, and lost revenues. Defendants citations in no way undermine any of the allegations or legal theories of legal malpractice stated in the Complaint. Based on the sufficiency of Plaintiff s allegations that Defendants sub-par performance directly caused Plaintiff harm, Plaintiff has properly alleged proximate cause. B. Plaintiff Has Properly Alleged Cognizable Damages In The Complaint Defendants next attack the Complaint by arguing that Plaintiff s alleged damages are speculative and not actually incurred. But, with respect to the issue of damages, it is settled that of 29

22 [t]o survive a CPLR 3211(a)(7) pre-answer dismissal motion, a pleading need only state allegations from which damages attributable to the defendant s conduct may reasonably be inferred. Lappin v. Greenberg, 34 A.D.3d 277, 279 (1st Dep t 2006) (citations omitted); see also Tenzer, Greenblatt, Fallon & Kaplan v. Ellenberg, 199 A.D.2d 45, 45 (1st Dep t 1993) (noting [p]laintiff s contention that defendant has failed to establish the damage element of her claim for legal malpractice must be rejected since defendant is not obliged to show, at this stage of the pleadings, that she actually sustained damages. The counterclaim is sufficient since it contains allegations from which damages attributable to plaintiff's failure to renew the lis pendens might be reasonably inferred ); Garnett v. Fox, Horan & Camerini, LLP, 82 A.D.3d 435, 436 (1st Dep t 2011) (same). Defendants criticize Plaintiff s ad damnum clause demanding $50,000,000 in damages as wildly speculative and without any merit. However, irrespective of the amount of damages Plaintiff alleges or ultimately proves at trial, the Complaint sufficiently alleges that Plaintiff suffered some amount of damages directly because of Defendants substandard performance. At this stage, that is enough for the denial of Defendants motion. The types of damages or the nature of damages that Plaintiff has alleged in the Complaint are proper, sufficient, and wellrecognized in connection with legal malpractice claims. Contrary to Defendants reliance on Zarin, the types of damages alleged in the Complaint are actual and ascertainable and are in no way speculative. Cf. Zarin, 184 A.D.2d at (also explaining that certain alleged damages were not connected with the defendants legal advice or legal services). More specifically, the Complaint alleges the delays Defendants caused in prosecuting Plaintiff s patent applications, the loss of patent term as a result of those delays, the impairment of the value of Plaintiff s patent portfolio, the need to fix Defendants errors in using placeholder of 29

23 claims that the USPTO actually considered in evaluating Plaintiff s patent applications, and the costs of hiring subsequent attorneys and other professionals to fix Defendants errors and failures. (Compl. 15, 60, 65, 66, 67, 68.) The loss of patent term and the costs of fixing an attorney s mistakes were specifically recognized as appropriate damages in a legal malpractice case in ASTech Int l, LLC v. Husick, 676 F. Supp. 2d 389, 404 (E.D. Pa. 2009). As the District Court further explained, [t]he fact that the precise nature of the damages is uncertain at this stage does not require a grant of judgment in favor of defendants. Id. at 405. Critically, the District Court noted that damages are speculative only if the uncertainty concerns the fact of damages rather than the amount. Id. (citation omitted). There is nothing speculative or unascertainable about the fact that Plaintiff has alleged damages it suffered as a result of Defendants malpractice. The Complaint sufficiently alleges the categories of harm Plaintiff suffered from Defendants substandard performance, which warrants the denial of Defendants motion. Plaintiff is entitled to develop the record as to the specific amount of its damages at a later stage of this action and was not required to prove its damages at this early pleading stage. Plaintiff s legal malpractice claim against Defendants is sufficiently alleged and is well past the minimum notice pleading standards of CPLR C. The Court Lacks Subject Matter Jurisdiction To Consider Defendants Assertion Plaintiff s Claims Are Not Patentable Under Alice Corp., Which Are Also Premature And Cannot Be Resolved On The Existing Record Defendants last argument challenging Plaintiff s legal malpractice claim is that the United States Supreme Court s decision in Alice Corp Pty. Ltd. v. CLS Bank Int l, 134 S. Ct (2014), makes Plaintiff s claims non-patentable. According to Defendants, because Plaintiff is not entitled to patent protection, Defendants cannot have committed legal malpractice because nothing they did impaired patents that could not be issued under Alice Corp. There are of 29

24 several problems with Defendants argument. First, the Court lacks the subject matter jurisdiction to determine the validity or patentability of Plaintiff s patent claims. Pursuant to 28 U.S.C. 1338, only federal courts have the exclusive jurisdiction to determine questions related to the validity of a patent or patent claims in Plaintiff s patent applications. The text of 28 U.S.C. 1338(a) specifically provides that No State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents, plant variety protection, or copyrights. And see Johnson & Johnson, Inc. v. Wallace A. Erickson & Co., 627 F.2d 57, 59 (7th Cir. 1980) ( Congress has vested original and exclusive jurisdiction of civil actions relating to patents in District Courts and [c]onsequently, the only authority competent to set patent aside, to annul it, or to correct it for any reason whatever, is vested in Courts of United States ); International Harvester Co. v. Long Mfg. Co., 235 F. Supp. 223, 225 (E.D.N.C. 1964) (explaining where validity of plaintiff s rights under patent is raised, all questions were required to await determination of effect of patent, which was exclusively federal question that could not be raised in state courts). In fact, not only are New York courts without jurisdiction to interpret the validity of a patent or of claims in a patent application, but there are zero cases that have been decided under New York law interpreting Alice Corp. or applying the principles of Alice Corp. This Court quite literally would be the first court in New York State to evaluate the patentability of patent claims. This is also why Defendants have cited zero New York state cases in their brief to support the argument of invalidity under Alice Corp. Under the circumstances, and based on the unmistakable lack of subject matter jurisdiction stemming from 28 U.S.C. 1338, the Court cannot evaluate the validity of Plaintiff s patent claims under Alice Corp. Second, even were the Court to conclude it has subject matter jurisdiction to evaluate of 29

25 Plaintiff s patent claims under Alice Corp., any such assessment is premature at this early stage of the action. Defendants have not provided the Court with any information or documents that would enable the Court to determine patentability under Alice Corp. The evaluation of patentability under Alice Corp. and the framework established by federal courts requires a full understanding of the basic character of the claimed subject matter. Bancorp Servs., LLC v. Sun Life Assurance Co. of Canada, 687 F.3d 1266, (Fed. Cir. 2012). Based on the Defendants meager descriptions of Plaintiff s patent claims in the Walpert Affidavit and the several filing receipts for the filing of Plaintiff s patent applications that Defendants provided (Defs. Exh. B), the Court has literally no information to use to evaluate the patentability of Plaintiff s patent claims. In fact, the filing receipts are partially redacted, and the un-redacted portions say nothing about the nature of Plaintiff s patent applications. As the court noted in WAG Acquisition, LLC v. Multi-Media, LLC, 2015 U.S. Dist. LEXIS (D.N.J. Sept. 10, 2015), the parties have not set forth stipulated representative claims or proposed constructions for the Court to review. As such, the Court cannot fairly apply Alice, particularly at step two, by attempting to conjure up all plausible claim constructions at this pleadings stage in the absence of stipulated constructions or at least Plaintiff s proposed constructions of its own patent. Id. at *17 (citation omitted) (emphasis added). The court also noted that [i]f the Court is going to invalidate [the patent-in-suit] on subject matter eligibility grounds before claim construction, then Defendants must establish that the only plausible construction [i]s one that... renders the subject matter ineligible (with no factual inquiries). Id. at *15-16 (citation omitted). And, the court explained that it will be rare that a patent infringement suit can be dismissed at the pleading stage for lack of patentable subject matter. Id. (citing Ultramercial, of 29

26 Inc. v. Hulu, LLC, 722 F.3d 1335, 1338 (Fed. Cir. 2013)). Accord Nomadix, Inc. v. Hospitality Core Servs. LLC, 2015 U.S. Dist. LEXIS (C.D. Cal. Apr. 3, 2015) (denying 101 argument on motion to dismiss because [a]though the [c]ourt has the patents in question before it right now... the exact functioning of the patented systems has not yet been fully briefed ); Synchronoss Techs., Inc. v. Hyperlync Techs., Inc., 2016 U.S. Dist. LEXIS 28727, at *9 (D.N.J. Mar. 7, 2016) (noting a dispute concerning the area of technology addressed in the Patents In Issue is not conducive to a resolution on a motion to dismiss at the initial stages of litigation ). Third, Defendants argument that Plaintiff s patent claims are ineligible for patent protection are substantively wrong because Plaintiff s claims do not fall within the types of abstract ideas or mathematical formulas excluded by Alice Corp. and similar authorities. This is not a question that can be determined on this motion to dismiss, but in general terms, Alice Corp. reaffirmed a two-step analysis for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts. See Bristol-Myers Squibb Co. v. Merck & Co., 2016 U.S. Dist. LEXIS 34292, at *4-5 (D. Del. Mar. 17, 2016). Under that framework, the Court must determine (1) if the patented technology touches upon ineligible subject matter, and (2) whether there are sufficient inventive elements such that the invention is significantly more than a patent on an ineligible concept. Id. (citing DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1255 (Fed. Cir. 2014)); see also Alice Corp., 134 S. Ct. at 2354 (explaining an invention is not rendered ineligible for patent simply because it involves an abstract concept ). If a court finds a patent directed toward an abstract idea, the patent may still be valid so long as it adds an inventive concept sufficient to ensure the patent amounts to significantly more than an abstract idea. See Alice Corp., 134 S. Ct. at Defendants cited authorities of 29