Attorney-Client Privilege And Work Product Immunity In Patent Litigation

Jun 2001 – Article
2001 Intellectual Property Law Update, edited by Anthony B. Askew and Elizabeth C. Jacobs, Aspen Law & Business.

§ 1.01 INTRODUCTION AND OVERVIEW

"Lawyers love to know the secret communications between opposing parties and their counsel. And some lawyers love to strike fear into the hearts of opponents by attempting to discover those communications."[2] On the other hand, assertions of attorney-client privilege or work product immunity are "a hindrance, albeit a tolerated one, to the disposition of justice"[3] and often "stand as a major obstacle to the fact-finding process."[4] Between these two extremes lies the battleground over the discovery of documents and communications withheld on the basis of privilege and work product. Perhaps nowhere is the battle over privilege and work product waged with more intensity and vigor than in the litigation of a patent case.

Although the general legal principles underpinning the attorney-client privilege and work-product immunity doctrine are the same in patent cases as they are in other areas of the law, a number of issues seem to arise again and again that are, by and large, unique to patent disputes. For example, in patent cases, there are frequently disputes as to whether, and to what extent, communications with U.S. or foreign patent agents may be privileged. In nearly every patent case, there are also questions about whether documents relating to conception, reduction to practice, and the patent application process are privileged or work product. In those cases where an accused infringer seeks to rely upon an opinion of counsel as a defense to the charge of willful infringement, the patentee may seek a broad waiver of the attorney-client privilege. When there is an issue regarding inequitable conduct, the accused infringer may try to pierce the patentee's privilege or immunity under the "crime-fraud" exception. At least one of these issues invariably arises in every patent case.

This chapter provides the general rules that apply to assertions of privilege and work product. Against this background, the discussion focuses on how the general rules have been applied to those questions that arise most frequently in patent cases.[5]

§ 2.01 GENERAL RULES AND AXIOMS

The Federal Rules of Civil Procedure broadly define what is discoverable, and narrowly define what is privileged subject matter. In particular, Fed. R. Civ. P. 26(b)(1) provides for a relatively broad scope of discovery, permitting discovery of:

any matter, not privileged, which is relevant to the subject matter

involved in the pending action . . . . The information need not be

admissible at the trial if the information sought appears reasonably

calculated to lead to the discovery of admissible evidence.

The "discovery provisions are to be applied as broadly and liberally as possible."[6] Consequently, there are few limitations on discovery.

It is, of course, proper to withhold documents that are protected by the attorney-client privilege. In contrast to the discovery provisions, however, "the privilege limitation must be restricted to its narrowest bounds,"[7] because privilege "is an obstacle to the investigation of truth."[8]

Although the party seeking to withhold documents always bears the ultimate burden of showing that they are privileged or immune as work product, the party requesting discovery bears an initial threshold burden of establishing that the discovery requested is both relevant and that there is a reasonable basis to believe that the information sought is not privileged or immune under Fed. R. Civ. P. 26(b)(3).[9] An in camera review of withheld documents for the purpose of evaluating the privilege or immunity claimed is not automatic. One court has explained the importance of the initial showing requirement as follows:

Although in camera review of documents does not destroy the attorney-client privilege, it is an intrusion which must be justified. Some threshold must be met by the party contesting the application of the privilege before the court examines the the materials. . . . . To empower the district court to review the disputed materials in camera, the party opposing the privilege need only show a factual basis sufficient to form a reasonable, good faith belief that in camerainspection may reveal evidence that information in the materials is not privileged. If the party makes such a showing, the decision whether to conduct the review rests within the discretion of the district court.[10]

This minimum threshold requirement is designed to prevent the district court from having to embark on "'groundless fishing expeditions.'"[11]

If the party requesting the discovery meets this initial burden, then the burden shifts to the party withholding the information from discovery to show that the material was either"'prepared in anticipation of litigation or for trial'"[12] (for work product assertions), or that the communication is attorney-client privileged.[13] Ipse dixit or blanket assertions of privilege or work product are not sufficient.[14] It is also the proponent's burden to show that the privilege or immunity has not been waived.[15] In any event, whether a privilege or immunity applies should be determined on a case-by-case basis.[16]

[A] Adequacy Of Privilege Log

Fed. R. Civ. P. 26(b)(5) provides the sole means by which a party resisting discovery on the basis of privilege (or work product) may withhold documents:

When a party withholds information otherwise discoverable under these rules by claiming that it is privileged or subject to protection as trial preparation material, the party shall make the claim expressly and shall describe the nature of the documents, communications, or things not produced or disclosed in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the applicability of the privilege or protection.

By its terms, the Rule does not mandate the creation of a privilege "log." Nevertheless, in patent cases involving sometimes hundreds or even thousands of assertedly privileged documents, parties do not hesitate to create a table or log that identifies the privileged documents. Regardless of its form, courts have consistently defined what information would be necessary to permit "other parties to assess the applicability of the privilege or protection":

To properly demonstrate that a privilege exists, the privilege log should contain a brief description or summary of the contents of the document, the date the document was prepared, the person or persons who prepared the document, the person to whom the document was directed, or for whom the document was prepared, the purpose in preparing the document, the privilege or privileges asserted with respect to the document, and how each element of the privilege is met as to that document.[17]

A party may support its claim of privilege either by the submission of an "adequately detailed privilege log in conjunction with evidentiary submissions to fill in any factual gaps," or by the submission of "affidavits or equivalent statements that address each document in issue."[18] In addition, some federal district courts have local rules which further define what information must be included in a privilege log.[19]

The consequences of failing to comply with these prerequisites are severe. The failure to provide the requisite information results in the denial of the asserted privilege and the production of the document(s) in question.[20] New designations and numerous new reasons for withholding documents as work product or privileged should be given no weight.[21]

§ 3.01 ATTORNEY-CLIENT PRIVILEGE ISSUES

[A] General Principles

To sustain a claim of attorney-client privilege, the withheld document or communication must meet a number of requirements. Though there is not one "test" for whether a communication is or is not privileged, the standard set forth in United States v. United Shoe Machinery Corp. is often cited as "the" test for privilege:

The privilege applies only if (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication is made (a) is a member of the bar of a court, or his subordinate and (b) in connection with the communication is acting as a lawyer; (3) the communication related to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion on law or (ii) or legal services or (ii) assistance in some legal proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client.[22]

While the United Shoe standard is widely applied, other courts have utilized variations of that test. For example, the Supreme Court of the United States has held that the elements of attorney client privilege are: (1) a communication between client and counsel, (2) intended to be and in fact kept confidential, and (3) made for the purpose of obtaining or providing legal advice.[23] According to the Federal Circuit, the "central inquiry" in determining whether a communication is privileged is "whether the communication is one that was made by a client to an attorney for the purpose of obtaining legal advice or services."[24]

"Confidentiality is a critical element of the privilege, and it is well established that once a party has made a voluntary disclosure of part of a privileged communication, the privilege is lost for all communications relating to the same subject matter."[25] The mere existence of an attorney-client relationship does not raise a presumption of confidentiality.[26]

The scope of the attorney-client privilege is somewhat broader than strictly those communications held with the attorney. The attorney-client privilege also protects documents and other information prepared for the purpose of seeking legal advice; the attorney-client privilege extends to such documents if the documents are eventually submitted to an attorney for the purpose of obtaining legal advice. More particularly, in preparation for obtaining legal advice from an attorney, employees of a corporation will often prepare documents. The attorney-client privilege has been found to apply to such documents prepared for the purpose of obtaining legal advice if they are eventually transmitted to an attorney for that purpose.[27]

There are also limitations to the attorney-client privilege. While the attorney-client privilege serves a very important purpose, the privilege is also an obstacle to the investigation of the truth. Therefore, the privilege is typically strictly confined within the narrowest possible limit consistent with the logic of its principal,[28] with courts viewing their duty as that of achieving a balance between the need for the disclosure of all relevant information and the need to encourage free and open discussions by clients in the course of legal representation.

The attorney-client privilege applies to communications from an attorney only to the extent that they reflect information obtained in confidence from the client for the purpose of obtaininglegal advice, as opposed to business information.[29] To the extent that a communication by an attorney is based on some other source—for example, public information or information from a third party—it is not protected by the attorney-client privilege.[30] Furthermore, simply because an attorney may have been copied on a communication does not make that communication privileged. Legal advice must have been sought or requested for the communication to be privileged. [31]

An ordinary business document does not become privileged merely because a copy was sent to an attorney.[32] "A corporation cannot be permitted to insulate its files from discovery simply by sending a 'cc' to in-house counsel."[33] Even legal advice may not be privileged if it is merely incidental to business advice.[34] The fact that the attorney was not the primary recipient of a document suggests two reasons for believing that the document is not privileged. First, documents circulated to nonlegal personnel are more likely to concern business rather than legal matters, which would indicate that the attorney was not acting in a legal capacity.[35] Second, the more a document is circulated to nonlegal personnel, the harder it is to conclude that the document was intended to be confidential.[36]

[B] Communications Relating To Conception, Invention, And Patenting

One issue which arises with great frequency in patent litigation is whether, and to what extent, documents that allegedly evidence the creation of an invention, or communications made in connection with the preparation or prosecution of a patent application, are privileged. The Federal Circuit's recent decision in In re Spalding Sports Worldwide, Inc.[37] provides an appropriate starting point for the analysis.

[1] The Spalding Decision

In Spalding, the district court ordered plaintiff to produce in discovery an invention record[38] of the patent-in-suit. The patentee filed a petition for writ of mandamus with the Federal Circuit seeking to vacate the district court's order. Concluding that the document was privileged, the Federal Circuit granted the writ. The court's decision is significant in a number of different respects, both procedural and substantive.

As a procedural matter, the court made clear that mandamus is an appropriate remedy, given the importance of protecting the attorney-client privilege. The court explained that mandamus is proper "when a petition is based on a substantial allegation of usurption of power, and raises an issue of first impression."[39] The court held that whether the attorney-client privilege applies to an invention record "is an important issue of first impression," and that mandamus is appropriate "'because maintenance of the attorney-client privilege up to its proper limits has substantial importance to the administration of justice, and because an appeal after disclosure of the privileged communication is an inadequate remedy."[40]

Another significant procedural matter--indeed, perhaps the most significant part of the Federal Circuit's decision--was the court's choice of law analysis. The Federal Circuit held that it would decide the privilege question as a matter of Federal Circuit law, and not the law of the regional circuit (the First Circuit, in that case). The court determined that whether an invention record is privileged is a question "unique to patent law because the invention record relates to an invention submitted for consideration for possible patent protection; it clearly implicates substantive patent law." Id. at 804. In deciding the choice of law issue, the Federal Circuit distinguished the facts in Spalding from the court's earlier decision in In re Regents of the University of California.[41] In Regents, the Federal Circuit had applied the law of the regional circuit in concluding that communications between a licensor and the attorneys of its licensee were privileged. The Federal Circuit in Spalding explained that because the licensing communication at issue in Regents involved parties to a contract (the patent was said to be "irrelevant"), the privilege issue presented in Regents was not "unique to patent law."

Having answered the fundamental choice of law question, the Federal Circuit then turned to the underlying substantive issue of whether the patentee's invention record was privileged as a matter of Federal Circuit law. The court concluded that "an invention record constitutes a privileged communication, as long as it is provided to an attorney 'for the purpose of securing primarily legal opinion, or legal services, or assistance in a legal proceeding.'"[42] Applying this standard, the court held that Spalding's invention record was privileged because it "was prepared and submitted primarily for the purpose of obtaining legal advice on patentability and legal services in preparing a patent application." Id.

The court explained that the privilege applied notwithstanding the fact that the document included "technical information" which would eventually be made public once the patent issued. The Federal Circuit reasoned that:

The fact that much of the technical information in one form or another

finds its way into the patent application, to be made public when the

patent issues, should not preclude the assertion of the privilege over the

communication in which that information was disclosed to the attorney.[43]

In dicta, the court also expressed its view on the so called Jack Winter[44] line of district court decisions which hold that the transmission of technical information to an attorney, and documents relating to patent prosecution, are not privileged because the attorney is acting merely as a "conduit" between the client and the PTO.[45] The Federal Circuit distinguished the Jack Winter line of authority as "not deal[ing] specifically with invention records" and found that, any event, those cases were "not binding on this court."[46] The Federal Circuit in Spalding remarked that "the better rule is the one articulated in this case."[47] The court in Spalding also cited with approval the Court of Claims decision in Knogo Corp. v. United States[48]and its progeny, a line of cases which had expressly rejected the Jack Winter "conduit" theory.[49]

[2] The Impact Of Spalding

The Spalding case does not stand for the blanket proposition that all invention and patent prosecution-related communications are privileged; its holding, strictly speaking, is limited to invention records submitted to patent counsel for purposes of legal advice on patentability. Nevertheless, the court's choice of law analysis, coupled with its criticism of the "conduit" theory, suggest that Spalding may have a significant impact in broadening the limits of the attorney-client privilege. Given the nature of the corporate invention and patent application process, it is not much of a logical stretch to argue that other kinds of documents relating to invention and patenting, like the invention records at issue in Spalding, also "implicate substantive patent law." Id. at 804. By deciding the privilege issue in Spalding as a matter of Federal Circuit law, the court has effectively freed itself from having to deal with the Jack Winter/conduit line of cases. Moreover, the court's dictum suggests that if given the opportunity in the future, the Federal Circuit would be willing to apply the same rule regarding privilege espoused in Spalding to other types of communications relating to the preparation and prosecution of patent applications.

In fact, district courts have begun to do just that. For example, in Softview Computer Products Corp. v. Haworth, Inc.,[50]the court observed that, "[t]heSpalding court relied in part on Knogo Corp. v. United States... The line of cases that follow Knogo stand for the proposition that the attorney-client privilegemay attach to communications regarding patent prosecution, so long as those communications meet the other criteria of the privilege."[51] The district court in Softview proceeded to apply the Spalding standard for privilege to all of the withheld documents at issue relating to the patentee's U.S. patent application.[52]

Likewise, in McCook Metals L.L.C. v. Alcoa Inc.,[53] the district court applied Spalding in concluding that a variety of prosecution-related documents, including draft patent applications, invention control reports, inventor questionnaires, and a duty of disclosure reminder form, were all privileged.[54] With regard to draft patent applications in particular, the district court in McCook acknowledged that other courts have refused to extend the privilege to such documents on the ground that "much of the information contained in the drafts has already made it to the public domain by means of a successful patent prosecution."[55] The court in McCook expressly disagreed with the rationale of those contrary cases because they "fail to recognize the legal importance that a first-rate patent attorney adds to the legal protection afforded the client by the proper legal draftsmanship of an airtight patent that is successfully and properly prosecuted."[56]

Finally, in Transonic Systems, Inc. v. Non-Invasive Medical Tech.,[57] the district court held that a document which included the patentee's in-house counsel's comments about a patent examiner's communication concerning the patent at issue was privileged. In that case, the court also applied and followed the Spalding test for privilege.[58]

[3] What Spalding Does Not Change

Notwithstanding the district courts' apparent willingness to apply the rationale of Spalding beyond invention records to encompass other types of documents created in connection with the patent application and prosecution process, that does not mean that all such documents will now be privileged. Regardless of how the communication is labeled, it still must meet all of the other requirements for privilege.[59]

Even under the Spalding test for privilege, the purpose of the communication must still be primarily for the purpose of obtaining legal advice or legal services.[60] The invention record at issue in Spalding was submitted by the inventors to Spalding's legal department for the purpose of making a patentability determination.[61] If the attorney is merely directing or transmitting documents or communications between the client and a governmental agency (such as the United States PTO or a foreign country's patent office), without any request (or response to a request) for legal advice or services,[62]then there is no privilege that attaches to such communications.[63] While there are no per se rules in determining whether a particular document constitutes a request for legal advice, the court must look to "the overall tenor of the document" to determine if such a request was either expressed orimplied.[64]

In addition, even under the Spalding test for privilege, the attorney-client communication must be "confidential" to qualify for any protection.[65] To the extent that a communication by an attorney is based on some other non-confidential source—for example, public information or information from a third party—it is not protected by the attorney-client privilege.[66] Even an "opinion letter" can be found not to be privileged if it relies on nonconfidential information and does not reveal the substance of any confidential communication with the client.[67]

The privilege also does not apply to documents relating primarily to business matters rather than legal advice.[68] Thus, a communication reporting an official action to a client is not, without more, privileged, since the communication is neither confidential information nor legal advice.[69] Transmittal letters and fax cover sheets are also rarely, if ever, privileged, since they do not normally contain either (1) confidential factual communications from the client for the purpose of securing legal advice, or (2) legal advice, opinions, or analysis from counsel which would reveal such communications.[70] One district court, applying Spalding, concluded that a client's authorization to file a patent application, a memorandum of a conference with a patent examiner, a status report regarding a patent application, a memorandum regarding a patent search, and a notification that the client's patent was about to issue and instructions to mark its device with the patent number, all were not privileged because none of those documents contained any confidential information or legal advice.[71]

Whether a "prior art" search is or is not considered a privileged communication in the aftermath of Spalding is not clear. Prior to Spalding, a number of district court cases held that prior art searches and prior art studies were not privileged because they do not contain or reflect information obtained in confidence from the client.[72] In Spalding, the accused infringer argued that a portion of Spalding's invention record that included a list of prior art should be disclosed since it did not request legal advice.[73] The Federal Circuit rejected that argument, finding that it was unnecessary "to dissect the document to separately evaluate each of its component."[74] According to the court, it is enough that the "overall tenor of the document indicates that it is a request for legal advice or services."[75] Since the Federal Circuit in Spalding based its privilege decision on the invention record as a whole, it still remains an open question whether a prior art search, standing alone, is a privileged communication. Based upon the broad standard set forth in the Spalding decision, however, such a document would probably be considered privileged if the primary purpose of conducting the prior art search were either to evaluate patentability or to aid counsel in the preparation of a patent application.[76]

The courts have not been consistent in applying the privilege to communications from the attorney to the client. In American Standard Inc. v. Pfizer,[77]the Federal Circuit refused to overrule a district court's determination that an opinion letter on patent validity from counsel to the client was