September 12, 2012 Articles

Scope of Waiver: Post-Seagate Trends

The standard for determining the scope of a waiver of attorney-client privilege is well-established. The scope of a waiver of work-product immunity, however, is more nuanced.

By Reginald J. Hill and Nangah N. Tabah

Courts have struggled immensely with the scope of waiver of attorney-client privilege and work product immunity in the context of an accused infringer's reliance on the advice-of-counsel defense to accusations of willful patent infringement. The well-established standard for determining the scope of the waiver of attorney-client privilege is that the waiver applies to "all other communications relating to the same subject matter." Fort James Corp. v. Solo Cup Co., 412 F.3d 1340, 1349 (Fed. Cir. 2005); see also In re Seagate Tech., LLC, 497 F.3d 1360, 1372 (Fed. Cir. 2007) (en banc), cert. denied, 552 U.S. 1230 (2008); Hercules, Inc. v. Exxon Corp., 434 F. Supp. 136, 156 (D. Del. 1977). The scope of waiver of work product immunity, however, is more nuanced.

The Federal Circuit has recognized three categories of work product relevant to the advice-of-counsel defense: "(1) documents that embody a communication between the attorney and client concerning the subject matter of the case, such as a traditional opinion letter; (2) documents analyzing the law, facts, trial strategy, and so forth that reflect the attorney's mental impressions but were not given to the client; and (3) documents that discuss a communication between attorney and client concerning the subject matter of the case but are not themselves communications to or from the client." In re EchoStar Commc'ns Corp., 448 F.3d 1294, 1302 (Fed. Cir. 2006). The EchoStar court noted that because counsel's opinion is relevant only to decipher the alleged infringer's state of mind, and not for its legal correctness, documents that counsel prepared but did not communicate to the client—the second category of work product—do not inform the court of an infringer's willfulness and are not discoverable. Id. at 1300.

The third category of work product is discoverable only to the extent that it discusses a communication to the client concerning whether a patent is valid, enforceable, and infringed, even though the document itself—such as an internal memorandum or email—was not communicated to the client. What is waived, for both attorney-client privilege and work product, are "letters, memorandum, conversation, or the like between the attorney and his or her client, [and] includes, when appropriate, any documents referencing a communication between the attorney and client." Id. at 1304.

While Seagate is clear that, as a general rule, the subject of waiver of attorney-client privilege and the waiver of work product immunity triggered by the advice-of-counsel defense will not extend to trial counsel, in light of Seagate's "chicanery" exception, district courts have taken varying approaches with respect to the scope of the waiver as it extends to trial counsel under circumstances the courts deem unique or exceptional. See Seagate, 497 F.3d at 1372–73. To further complicate the scope of waiver landscape, district courts have been left to apply EchoStar'sholding that the waiver rules should be the same between in-house counsel and outside counsel. See EchoStar, 448 F.3d at 1299 ("[W]hen [defendant] chose to rely on the advice of in-house counsel, it waived the attorney-client privilege with regard to any attorney-client communications relating to the same subject matter . . .").

This article addresses how district courts have carved out the scope of waiver of attorney-client privilege and work product immunity in patent infringement cases post-Seagate. The article looks specifically at waiver with respect to opinion counsel versus trial counsel, and outside counsel versus in-house counsel. The article discusses circumstances deemed "unique" by the district courts to warrant waiver for trial counsel and recommends steps to minimize waiver.

Seagate Opinion
Seagate squarely addressed the question of scope of waiver in willfulness cases with respect to opinion counsel and trial counsel, but left much uncertainty concerning when waiver applies to trial counsel—the so-called "chicanery" exception. Seagate had relied on the advice-of-counsel defense to defend against a charge of willful infringement. The district court held that the waiver of privilege extended to communications with opinion counsel as well as trial counsel. See Seagate, 497 F.3d 1366–67. On appeal, the Federal Circuit disagreed, siding with Seagate that opinion counsel and trial counsel perform significantly different functions, and "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." Id. at 1373.

The court distinguished opinion counsel's role as one "to provide an objective assessment for making informed business decisions," whereas "trial counsel focuses on litigation strategy and evaluates the most successful manner of presenting a case to a judicial decision maker." Trial counsel is also engaged in an adversarial process, and thus the court held as a general proposition that "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." Id. at 1374. Similarly, the court held that "relying on opinion counsel's work product does not waive work product immunity with respect to trial counsel." Id. at 1376. Finally, because willful infringement is based mainly on prelitigation conduct, communication with trial counsel has little, if any, relevance warranting its disclosure.

The court carved out an exception, however, in which trial courts could use their discretion to extend waiver to trial counsel under unique circumstances, such as if a party or counsel engages in "chicanery." Id. at 1375–76. Chicanery is defined as "a deception by artful subterfuge or sophistry." 2012. (June 5, 2012). Post-Seagate, district courts have deemed certain circumstances to be extraordinary enough for waiver with respect to trial counsel, although no case law was found expressly identifying attorney conduct as chicanery sufficient to warrant waiver.

Scope of Waiver Post-Seagate

Waiver Regarding Opinion Counsel
Consistent with Seagate and EchoStar, district courts have found that disclosure of attorney opinion to rebut claims of willful patent infringement waives privilege for all communications with opinion counsel on the same subject matter. See, e.g., Reedhycalog UK, Ltd. v. Baker Hughes Oilfield Operations Inc., 251 F.R.D. 238, 241 (E.D. Tex. 2008); Alloc, Inc. v. Pergo, L.L.C., 2010 WL 3808977, at *6–7 (E.D. Wis. Sept. 23, 2010). It follows that where a defendant does not raise the advice-of-counsel defense, there is generally no waiver.

Waiver Regarding Trial Counsel
Since Seagate, with a few exceptions, district courts have generally held that relying on opinion counsel's work product does not waive work product immunity with respect to trial counsel. For example, a court in the Southern District of New York noted that "[i]t is clear that the scope of discovery is relegated to prelitigation and gaining trial counsel's opinions is not relevant." Convolve, Inc. v. Compaq Computer Corp., 2007 WL 4205868, at *3 (S.D.N.Y. Nov. 26, 2007). The Convolve court observed that the accuser needs to focus on whose opinion the defendant is relying upon, and then needs to separate the communication made and created before litigation from all other privileged communications that were shared with the alleged infringer. Id. at *4.

We are not aware of a district court decision that has expressly explored the "chicanery" exception, but district courts have found waiver with respect to trial counsel under three exceptional or unique circumstances.

Exceptional circumstances have been found when opinion and trial counsel belong to the same firm or are the same person, thus warranting waiver. The U.S. District Court for the Northern District of New York ordered the deposition of trial counsel who was also opinion counsel. NewRiver, Inc. v. Newkirk Products, Inc., 2008 WL 5115244, at *3 (N.D.N.Y. Dec. 4, 2008). The court noted that since one of the opinion counselors was also acting as one of the trial attorneys, "the lines may be blurred between prelitigation opinion related disclosures and post-complaint communications with trial counsel." The court also noted that "Newkirk should not be allowed to evade an inquiry into the opinions simply because it chose one of the opinion counselors as its trial counsel." Most important, the court held that post-complaint communication with trial counsel may remain confidential. Recognizing that in the course of obtaining prelitigation opinion disclosures, "there is a risk of encountering nondisclosed work product and trial-generated work product and communications between client and trial counsel," the court proffered that proper guidance would minimize this risk.

Another case finding exceptional circumstances is Tyco Healthcare Group LP v. E-Z-EM, Inc., 2010 WL 2079920, at *2 (E.D. Tex. May 24, 2010), in which opinion and trial counsel belonged to the same law firm and opinion counsel was an active member of the trial team. The court ordered disclosure of all communication on the same subject matter included in the opinion letter, stating that the case presented the "unique circumstances" envisioned by Seagate. Id. at *4.The communication waived was between opinion counsel and the client, E-Z-EM; opinion counsel and the rest of the trial team; and the trial team and the client. The court also found that E-Z-EM waived immunity for all work product that referenced such communications, and for all work product on the same subject that was communicated to the client. Id. at *3. The court was concerned that the defendant had "casted doubt on the credibility of the opinion letter by asking the drafter of the opinion to become an active member of the trial team," and E-Z-EM had blurred the distinction between the functions of opinion and trial counsel by allowing opinion counsel to join the trial team.

In contrast, however, waiver does not extend to new trial counsel that replaced the original trial counsel, which was also opinion counsel. See Alloc, Inc. v. Pergo, L.L.C., 2010 WL 3808977, at *6–7 (E.D. Wis. Sept. 23, 2010). In Alloc, for example, the accused infringer's (Pergo) opinion counsel had originally acted as its trial counsel when the suit was filed. Id. at *1. Pergo produced several opinions of counsel received from its opinion counsel around the time the lawsuit was commenced. Opinion counsel, however, was replaced with different trial counsel shortly thereafter, and trial counsel later wrote five additional opinion letters on validity, enforceability, and infringement. The court ruled that since trial counsel appeared to be operating independently from opinion counsel, the waiver of privilege from producing opinion counsel's opinions did not extend to trial counsel's opinion that came approximately five years later. Id. at *6–7.

The court ultimately noted that "while Pergo's decision may have been prescient, no evidence [was] presented suggesting that Pergo switched trial counsel primarily to circumvent the waiver of privilege." Id. at *7. Further, it is prudent litigation strategy—not chicanery—to retain trial counsel separate from opinion counsel.

When trial and opinion counsel are not independent. Though trial counsel is ordinarily shielded from waiver, communication between opinion counsel and trial counsel on the same subject matter of the opinion—prior to the litigation being filed—can be subject to discovery. The court may also order deposition of persons who offered technical information to opinion counsel. See Se-Kure Controls, Inc. v. Diam USA, Inc., 2008 WL 169029, at *2 (N.D. Ill. Jan. 17, 2008). In Se-Kure Controls, the accused infringer's trial counsel provided documents and materials for opinion counsel to review before his deposition, and the court granted the patentee's motion to compel the accused infringer to produce emails and other documentary communications such as opinion letters and memoranda from the trial counsel given to the opinion counsel before the litigation commenced that is relevant to the patent at issue. Id. at *3.

Similarly, in SPX Corp. v. Bartec USA, LLC, 247 F.R.D. 516 (E.D. Mich. 2008), the court granted the patentee's motion to compel the accused infringer to produce documents regarding communication it had with opinion counsel, and communication it had with trial counsel before the suit was commenced based on the waiver of privilege from relying on an opinion of counsel. What is important here, however, is that notwithstanding the patentee's overbroad document requests, the accused infringer's failure to provide an adequate privilege log compelled the court to require compliance with patentee's document requests. Id. at 518. The accused infringer failed to show that any of the communications with trial counsel were after the suit was commenced.

While the court recognized the categories of communications and work product that are not subject to the waiver—(1) uncommunicated work product that does not memorialize a conversation between lawyer and client; (2) communications with trial counsel that post-date the filing of the lawsuit; and (3) confidential communications that do not relate to the invalidity, unenforceability, or non-infringement—it was "impossible to determine from the privilege log . . . whether any of the documents not produced [fell] within the protected categories." Id. at 527.

Disclosure of opinion of counsel to a third party (government agency and accused infringer's customers). Opinions of counsel may be discoverable when an accused infringer discloses the conclusion of the opinions to third parties. American Family Life Assur. Co. of Columbus v. Intervoice, Inc., 2010 WL 3000238, at *1, *3–4 (M.D. Ga. July 28, 2010). American Family was an indemnification action in which the court ruled that the defendant waived privilege associated with opinions of the counsel it had obtained analyzing the infringement and validity of asserted patents, by disclosing to the SEC and to one of its customers that it obtained opinions that concluded there was no infringement and the claims were invalid. The court found that by revealing the conclusions of the opinion, the defendant had waived attorney-client privilege, and once outside counsel had communicated the opinion letter to the defendant—its client—any work-product immunity associated with the opinion letter became waivable should the client disclose the letter, as was done.

Waiver Regarding In-House Counsel
With respect to opinions and communication with in-house counsel, two sets of considerations are important—identifying whose opinion the defendant seeks to rely on, and separating pre- and post-litigation communication and work product. See Convolve, Inc., 2007 WL 4205868, at *5.

Pre-litigation. Waiver extends to pre-litigation communication with in-house counsel to the extent that defendants rely on issued opinions in an advice-of-counsel defense. Asserting the advice-of-counsel defense based on opinions issued by in-house counsel "waives work product protection and the attorney-client privilege for all communications on the same subject, as well as any documents memorializing attorney-client communications." This waiver does not, however, "extend to work product that was not communicated to the alleged infringer." Convolve, 2007 WL 4205868, at *5 (citing Seagate and noting that this holding was consistent with EchoStar).

Post-litigation. While post-litigation communication is a closer question, the Southern District of New York observed that in-house counsel more closely resembled opinion counsel than trial counsel "because they offer what the defendants treat as objective assessments for making business decisions." Convolve, 2007 WL 4205868, at *5. Nonetheless, the court found no basis for taking discovery of in-house counsel communication after the commencement of litigation. Because post-litigation opinions, even of outside opinion counsel, are of "marginal value"—the willfulness analysis focuses on pre-litigation conduct—a court will likely find no basis for taking discovery of in-house counsel communication after the litigation was commenced. See id. Cf. V. Mane Fils, S.A. v. International Flavors and Fragrances Inc., 2009 WL 1968925, at *5–6 (D. N.J. July 1, 2009).

Simply designating in-house counsel to be trial counsel, however, may not get around the waiver. In Duhn Oil Tool, Inc. v. Cooper Cameron Corp., 2009 WL 3381052, at *15 (E.D. Cal. Oct. 15, 2009), the accused infringer relied on an opinion of counsel by in-house counsel to defend against a willful infringement allegation. The court granted the patentee's motion to compel the accused infringer to produce documents of communication with its in-house counsel that fell within the scope of the waiver, and rejected the accused infringer's argument that in-house counsel was also acting as trial counsel and therefore could rely on the trial counsel shield of Seagate. The court was not persuaded by Cameron's assertion that in-house counsel was also trial counsel due to the circumstances, which included the fact that in-house counsel had previously been identified on numerous occasions as serving in a traditional in-house counsel role, and the pro hac vice application for in-house counsel was filed years into the litigation and just one day prior to the filing of the joint statement being considered by the court.

Conclusion and Steps to Minimize Waiver
While district courts generally hold that waiver does not extend to trial counsel, courts may waive privilege when there is a concern that the defendant is attempting to use the privilege as a sword and shield. The following circumstances and communications have been deemed to fall within the scope of waiver: when opinion and trial counsel are the same person or belong to the same firm; pre-litigation communication between opinion and trial counsel on the subject matter of the opinion; and suspicious timing of identifying in-house counsel as trial counsel. As district courts continue to further define the scope of waiver with respect to trial and in-house counsel, it will be interesting to see what other circumstances are identified as unique or exceptional to warrant waiver.

Against this backdrop, litigants should take steps to minimize the risk of waiver, such as ensuring that separate issues are addressed in separate opinions; maintaining a clear line between the end of opinion work and start of pre-litigation and litigation work; minimizing communications that comment on the opinion, as these also may be subject to discovery; recognizing the paper trail being created and discarding unnecessary drafts; limiting or avoiding post-filing opinions of counsel; and generally, limiting access to the opinion.

Keywords: litigation, intellectual property, waiver, attorney-client privilege, work product immunity, prelitigation, opinion counsel, trial counsel

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