October 2008 Archives

Seagate relied on outside counsel for opinions on patents and relied on the advice of counsel defense to rebut charges of willful infringement. The District Court held that this amounted to a waiver of privilege with any counsel, including trial counsel. The CAFC reversed, stating: "[Asserting the advice of counsel defense and disclosing opinions of opinion counsel do not constitute ] waiver of the attorney-client privilege for communications with trial counsel. We do not purport to set out an absolute rule. Instead, trial courts remain free to exercise their discretion in unique circumstances to extend waiver to trial counsel, such as if a party or counsel engages in chicanery."

It is not a bright-line rule that waiver is cut-off as to trial counsel if separate counsel wrote the opinion that is relied upon; such a rule could lead to negative consequences, for example, causing opinions to be converted into insurance-type documents, rather than business documents. Opinion counsel should serve to provide an objective assessment for making informed business decisions, while trial counsel focuses on litigation strategy and evaluates the most successful manner of presenting a case to a judicial decision maker. Fairness counsels against disclosing trial counsel's communications on an entire subject matter in response to an accused infringer's reliance on opinion counsel's opinion to refute a willfulness allegation. However, questions regarding in-house counsel still linger.

In Osram v. Nillsen, (CAFC 2008), Osram argued that Nilssen waived attorney-client privilege without proper notice because Nilssen relied on his tax counsel in determining that his company was eligible to pay small entity maintenance fees on the patents at issue, and Nilssen waited until the trial to make this claim. The District Court agreed with Osram, and the CAFC affirmed there was waiver and used it as a factor in determining inequitable conduct and, ultimately, that the case was 'exceptional'. While the waiver ruling was not central to the case, it did mesh with the ruling in Seagate.

Discovery proceedings in a typical patent case will usually seek documents and communications concerning a wide variety of matters, including testing, design and development by inventors, consideration of third party patent rights, patentability of the invention, study of prior art, invention disclosures, draft applications and notes, and prosecution of the patent application. The Knogo line of cases states that technical information from client to attorney may be privileged. To that end, the client must make a communication intending that the communication be kept confidential. The mere fact that the communication consists of information from public domain does not negate privilege. Knogo, 213 U.S.P.Q at 940-941.

The Jack Winter line of cases, however, concludes that communications between patent lawyer and client concerning technical information needed for patent application generally not privileged. The rationale behind this conclusion is that the attorney is a "mere conduit" for the information and that business advice is not legal advice. Furthermore, there is no expectation of confidentiality by client because of to the duty to disclose the technical information to the Patent Office. Jack Winter, Inc. v. Koratron Company, Inc., 54 F.R.D. 44, 47 (N.D. Cal. 1971).

The Federal Circuit has been critical of the Jack Winter rationale. In re Spalding involved the issue of whether an invention record prepared by the inventor for in-house counsel was privileged. The privilege issue was decided as a matter of Federal Circuit law. The invention record in Spalding was privileged because it was a communication to in-house counsel, the purpose of which was to determine patentability. Furthermore, it was not necessary for the document to expressly request legal assistance, as the "overall tenor" of the document indicated that it was a request for legal advice or services. In re Spalding, 203 F.3d 800, 803-06 (Fed. Cir. 2000).

Some district courts have extended rationale of Spalding to other types of communications and documents. However, the Jack Winter decision has never been expressly overruled, even though no post-Spalding cases follow it.

To determine whether privilege applies to patent-related communications, the reasoning of Spalding should be applied. Additionally, a privilege claw-back and non-waiver provision should be included in a protective order. While an effective document retention and control policy may moot some of these issues, any such policy must be for legitimate purpose; furthermore, one can not destroy documents if it is known or believed that they are relevant to an actual or potential litigation.

Stay tuned to Post Grant for the next installment in this series: When is attorney-client privilege waived?